Revised Guidance for the Fallow Discovery Process
(July 2005)
A. Objective:
To stimulate prudent activity in currently fallow discoveries in order to enhance
development of the UK’s oil and gas resources. This will be achieved through a fair
and reasonable cooperative industry and DTI initiative.
B. Definitions:
A discovery is any well where hydrocarbons were encountered. Multiple horizons are
treated as a single discovery.
Fallow discoveries are those discoveries where the initial term (normally 6 years) has
expired and there has been no ‘Significant Activity’ such as appraisal drilling,
dedicated seismic acquisition, extended well testing, or other substantial dedicated
activity for a period of 3 years.
DTI further subcategorises fallow discoveries into "A" and "B" classifications:

Fallow A: a fallow discovery in which the current licensees are doing all that a
technically competent group with full access to funding could reasonably be
expected to do. Three sub-classes exist:
 ‘Linked’ Fallow A for a discovery where it can be demonstrated there is
ongoing significant linked and approved investment in an area (exploration or
development) and the discovery is explicitly included in this investment plan.
Examples of such linkage could include 1) clustered (within the same or
adjacent blocks) discoveries or leads which need completion of further
planned exploration activity to enable development, 2) a discovery in close
proximity to a new or existing development which is actively included in the
wider field plans.
 ‘Stranded’ Fallow A which could include situations where there is a lack of
infrastructure or viable ullage (e.g. WOB) or where adequate technology does
not exist e.g. technically-challenged HPHT, heavy oil opportunities, ultra tight
gas etc.
 ‘Active’ Fallow A where a discovery is newly fallow and where Significant
Activity has been pledged but has yet to be fulfilled.

Fallow B: a fallow discovery in which the current licensees are unable to progress
towards activity due to misalignment within the partnership, a failure to meet
economic criteria, other commercial barriers, or a combination of these.
Any fallow discovery (or exploration potential) vertically underlying or overlying an
existing development will be considered under the Stewardship process rather than
Fallow.
DTI will seek, as part of its 2005 review exercise, to ensure that only those fallow
discoveries that have some development potential will be included in the fallow
discovery process. Accordingly companies will be encouraged to agree that any
discoveries without development potential are removed from the process and the
acreage treated as fallow blocks.
C. Fallow Discoveries Process:
1. During the first quarter of each year, in conjunction with the Fallow Blocks
process, DTI will produce a listing of all discoveries it considers fallow (either
A or B) and will send the list to all relevant licensees inviting their views on
the proposed classification. Following appropriate dialogue, DTI will make a
final classification that will be communicated to licensees along with any
requisite explanations.
Fallow A Discoveries:
2. Any Linked Fallow A discovery will need to be part of an agreed, and
financially approved, nearby exploration or development activity plan. This
detailed activity plan, which may be longer than the normal 2-year Fallow B
process, must ultimately lead to the delivery of Significant Activity on the
fallow discovery. Should the agreed associated activity plan not be executed
or, on completion, fail to help deliver a firm Significant Activity plan on the
fallow discovery, then, unless agreed otherwise with DTI, the discovery will
be relinquished after a further period of 6 months (to allow time for
divestment). In the case of divestment, any incoming licence group would be
required to deliver a funded activity plan within 3 months of the sale being
agreed or the discovery will be relinquished.
3. All Fallow A discoveries will be posted on the DTI website (along with agreed
reasoning for the classification) and will be reviewed on an annual basis to
check progress against plans and to assess whether the classification remains
appropriate.
Fallow B Discoveries:
4. Following classification there is a 3-month period during which licensees are
encouraged to present any activity plans or re-allocation of interests that might
help facilitate taking the discovery out of Fallow status. If this is not
forthcoming then the discovery will be posted as Fallow B on the DTI web site
(along with an agreed reasoning for the classification). This date will be
deemed the "release date".
5. For the 2 years that a discovery is listed as Fallow B on DTI’s web site,
licensees are free to market the asset as they see fit and will ensure that any
data of release age is available to third parties through normal release channels
(as per well and seismic release guidelines). Where appropriate, Fallow B
discoveries may be presented at the annual PESGB/DTI Prospect Fair.
6. After 21 months of being a released Fallow B discovery, licensees and
interested third parties should report to DTI any plans for proposed Significant
Activity. Any licensee without a firm activity plan at that time will assign its
interest and any agreed remaining liabilities to any co-licensees or third parties
with a firm plan if requested by them to do so. Where two or more parties are
competing for the equity then the choice would be made on normal
commercial criteria.
7. If Significant Activity is planned and agreed but has not yet taken place, then
the discovery will temporarily be re-categorised as Fallow BR (Rescued) until
completion. The Significant Activity should take place within 1 year of the
activity plan being agreed (allowing for extenuating circumstances).
8. Following completion and agreement with the DTI that Significant Activity
has taken place, the discovery will be deemed not fallow and treated as such
for 3 years.
9. Where no satisfactory Significant Activity plan is agreed by the end of the 2year Fallow B period or an agreed plan has not been executed, then the
licensees will relinquish the acreage containing the fallow discovery. In such
cases licensees will propose and agree with DTI a defined geographic area
and, in justifiable cases, a stratigraphic interval around the discovery.
10. Relinquished discoveries will be made available in the next Licensing Round.
Licensees will ensure that released data relating to the discovery is made
available promptly and listed on DEAL.
11. Prior to relinquishment, licensees will agree to fully abandon any wells and
have removed any suspended wellheads by a specified time. Assignment of
these obligations may occur at the time of assignment of equity in the
discovery to the co-licensees or third parties.
12. The industry will continue to introduce its remaining multi-well discoveries
into the fallow process in the currently agreed manner.
D. Change of Interest
Where Fallow B discoveries are assigned, divested, farmed out, or the operator
changes within the initial 3 month pre-release phase or during the 2 year Fallow B
period, any new licence group will be expected to deliver a plan and fulfil activity in a
timeframe as close as is reasonably possible to that which would have been the case
had no change in interest or operatorship occurred. To facilitate this, current owners
should make best efforts to market Fallow B discoveries in a manner that will give
new owners reasonable time to develop an activity plan ready for submission to DTI
at the 21 month review point. If a sale is only agreed within the final 3 months of the
2 year Fallow B period then the new licence group must, at that time, provide
assurance to DTI that a firm plan of activity will be forthcoming within a further 3
months. In the event of this not materialising then the discovery will be relinquished.
E. Phasing in of New Process
New and existing Fallow A&B discoveries (including those with no activity plan
which have been through the process and continue to be held by the original owners)
will be reviewed with licensees during 2005 to ensure the classification and process is
in accordance with these revised procedures. This may for example include moving
some existing Fallow A or B discoveries across into the new ‘Linked’ Fallow A
classification. Remaining released Fallow B discoveries (from 2002 – Jan 2005) will
be relinquished at the end of 2006 should no firm activity plan be forthcoming. DTI
will seek relinquishment of fallow discoveries before the end of 2006, particularly
where they have already been through or are a significant way through the release
process. The full process described here will apply for Fallow B discoveries released
in January 2006
F. Median Line Discoveries
Fallow Discoveries adjacent to Median Lines will be brought into the process while
fully recognising inter-government and cross border licence implications and the need
to maintain the National and UK licence interests.
G. DTI Regulatory Position
If it appears to DTI at any stage in the process that there is a firm activity plan that is
not being progressed on a commercial basis, the DTI will consider using its powers
under the PSPA to require the licensees to undertake activity to establish commercial
viability or forfeit the licence (or part thereof).
H. Right of Appeal
DTI recognises this is a voluntary process and will apply the rules in a fair and
reasonable manner. Where companies feel their case has not been fully understood or
the rules are not being applied properly or are producing an unreasonable outcome,
they should raise these concerns for review with senior DTI officials.